Starbucks CEO makes major announcement in turnaround strategy

A major characteristic of most chains is their persistence in maintaining the same restaurant appearance across all their locations.

Although this can build brand recognition and develop familiarity among consumers, it may also prevent chains from evolving and keeping up with the latest trends.   

Related: Starbucks CEO announces major update on turnaround plan

Think about how often people remodel their homes, redecorate, or make slight changes to their exteriors. This is because most people get bored with seeing the same old things every day, and no one wants to be labeled as antiquated or called out for lacking style.

Likewise, remodeling an entire company's store fleet takes a significant investment, but it's one that can pay off when it reinvigorates a brand.  

Starbucks unveils results from its short-term changes

Starbucks  (SBUX)  CEO Brian Niccol revealed that over the last quarter, he visited multiple stores to meet with partners and customers personally and get a better feel for the daily environment at the cafés. 

As a result, Starbucks implemented multiple in-store and hospitality changes over the last few months to make cafés feel more like homes (i.e., a "third place" for customers). 

To foster connections, baristas are now writing handwritten notes on cups and making personal handoffs to customers.

Related: Starbucks to unveil a surprising, first-of-its-kind store

Encouraging customers to stay longer at Starbucks coffee shops is also a priority for the company so that it can improve its declining foot traffic. 

To accomplish this goal, Starbucks returned free in-café refills on hot and iced brewed coffee and tea at participating locations for non-Starbucks Rewards members. It also brought back ceramic mugs for in-house sipping and reintroduced condiment bars after they were banished during the pandemic.

Niccol claims these quick changes have already shown improvements in traffic, bringing its store traffic decline to 4% compared to the previous quarter's 8%. However, the results haven't been as quick, since the numbers remain negative. 

"We’ve seen more customers choose to sit and stay in our cafés, and we continue to receive overwhelmingly positive feedback from customers, demonstrating that small details and hospitality drive satisfaction," said Niccol during an earnings call.

Most of the changes aimed at improving numbers in the short term have already been implemented. However, the time has come for Starbucks to enact some costlier changes.

Starbucks begins long-term coffee shop revamps in two key states

Starbucks wants to provide a welcoming space and build a community, and has stated that revamping stores is a key improvement the company must invest in to meet customers' standards and deliver an exceptional experience. 

Mass renovations can be a financially detrimental move for many companies, especially those that have experienced continuous declines. However, Starbucks believes these changes are essential for the future of the business and has developed a strategy to keep renovation costs down and minimize closure days to prevent it from losing revenue.

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Starbucks announced it will begin a string of store remodeling projects over the next few months, and New York and Southern California stores are the first ones on the list.

"While we still see long-term potential to double our overall U.S. footprint, we have to improve the health of our portfolio. As a first step, we’re taking a critical look at our current portfolio to ensure every coffeehouse we operate provides a great customer experience," said Niccol.

With these revampings, Starbucks aims to develop a pipeline that will help it improve its long-term economics.

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